Stablecoin advocates urge Congress to allow interest

TLDR

Stablecoin industry groups in the US are pushing Congress to let regulated stablecoins pay some form of interest or rewards to users instead of banning yield entirely.

1. Advocates back the CLARITY Act, which would allow regulated, fully reserved payment stablecoins and oppose proposals that categorically ban yield on these tokens.
2. Banks warn of massive deposit flight if stablecoins can pay interest, but White House economists and crypto groups argue the risk is overstated and consumers would lose meaningful income.
3. The CLARITY Act faces a tight deadline in the Senate, and its outcome will shape whether US stablecoins look like zero?yield digital cash or yield?sharing cash alternatives.

Deep Dive

1. What Advocates Want Congress To Do

The current battle centers on the Clarity for Payment Stablecoins Act (CLARITY), which is paired with the already passed GENIUS Act setting 1:1 reserve and oversight rules for US payment stablecoins.

A bipartisan compromise in CLARITY would allow tightly supervised issuers to share some yield through activity-based rewards, while some banking lobby proposals push for an outright ban on any stablecoin interest. Industry letters from more than 120 organizations and groups like the North Carolina Blockchain Initiative urge lawmakers to advance CLARITY and reject a blanket yield ban, arguing it would push capital and innovation offshore.

2. Why Interest On Stablecoins Is So Controversial

Banking trade groups claim that allowing yield-bearing stablecoins could trigger up to trillions of dollars in deposits leaving traditional banks, pressuring lending and small institutions. A widely cited figure in Senate discussions put potential deposit flight at $6.6 trillion, which has fueled aggressive lobbying against stablecoin yield rules.

The White House Council of Economic Advisers pushed back, finding that banning yield would add only about 0.02 percent to bank lending but impose roughly $800 million in net welfare losses on consumers, according to a detailed analysis referenced in coverage of the CLARITY negotiations. Advocates say the real fight is over who keeps the Treasury bill yield that already exists in stablecoin reserves, not whether risk suddenly appears.

3. Timeline And What To Watch Next

Senator Bernie Moreno has framed the end of May as Congresss last real shot this cycle to pass the CLARITY Act, warning that missing the window could stall crypto market rules for years as elections take over the calendar. The bill still needs a Banking Committee markup, a 60?vote Senate passage, reconciliation with other versions, and a presidential signature. Coverage notes that Banking Committee time has already slipped into May amid other priorities.

Meanwhile, traditional players are positioning around whatever rules emerge. Morgan Stanleys new Stablecoin Reserves Portfolio offers compliant, interest?earning reserve management for issuers under the GENIUS framework, highlighting how much value sits in those reserve yields.

Conclusion

The push from stablecoin advocates is not for unregulated yield, but for Congress to codify a framework where fully reserved, supervised issuers can share part of their reserve earnings with users. Banks and some lawmakers see this as a threat to deposits, while economists and crypto industry groups frame a yield ban as high consumer cost for minimal systemic benefit. How the CLARITY Act resolves this tension will shape the competitiveness of US?domiciled stablecoins versus offshore alternatives and the kind of products crypto users can access in the coming years.